(Note that the ISO on the 5D is raised 'two stops' to counter the relative aperture being lowered two stops -- ISO isn't really measured in 'stops', thus my quote marks to appease the anal types.)

What is ISO "really measured" in, then?

What you should get, in theory, is two 'identical'(ish) shots with the same characteristics -- framing (actually no, due to 3:2 v 4:3, but you should get the same angular coverage across the diagonal), DOF, and also apparent brightness and noise.

You will most likely find that this is not quite the case, due to the 5D being an older design and having a comparatively worse sensor.

However, if you ignore the fact that this doesn't really work in reality, it is a reasonably solid idea.

In reality, it's pretty freakin' close for sensors of the same generation.

Now, you have to bear in mind that unless noise is an important issue then this is something of an irrelevance (IMO).

There's still DOF. So I guess you're saying that if noise and DOF (which necessarily means the corners will be rendered significantly different for the vast majority of scenes) don't matter, then, sure. May as well just use a compact then, right?

My preference is to simply understand that a larger sensor will yield real benefits when the ISO must be raised quite high (and this changes: so my E-5 is pretty good through to ISO 1600, then falls off severely; where the E-M5 is good through to ISO 3200, then falls off less severely), or when you want a shallower DOF for a given focal length.

Each stop decrease in total light reaching the sensor results in a 41% increase in photon noise. However, as the light gets dimmer and dimmer, the read noise (the additional noise added by the sensor and supporting hardware) begins to become dominant, so, at a certain light level, the noise in the photo is dominated by the read noise.

Oh, and also bear in mind that my caveats above with respect to 'equivalence' can also be ignored if you use the phrase "all else being equal". This is what Joe (Great Bustard) prefers to use, and is perfectly fine provided you realise that this is not likely to be the case in reality.

All else is never equal. But "all else" can often be accounted for. It's like gravity -- for the most part, we only need to worry about the earth. But if we want to explain the tides, we have to include the moon. If we want to explain spring tides, we need to include the sun. Etc., etc., etc.